Abstract

This study examines stock market response to the revision of accounting standards with respect to global financial crisis by event study methodology using the Korean Stock Exchange data. We first measure the differences of abnormal return among industries. Moreover we investigate the relations between company's characteristics and abnormal return. The empirical results are as follows：First, investor responses to the revision of accounting standards are likely to be positive for shipbuilding industry and marine transportation industry. These companies have advantages of revised accounting standards to show their true reflection of economic substance on the financial statements. The other industries have not reacted to the revision of accounting standards significantly. Second, investor responses to announcement are negative for firms with higher tangible asset ratio. Under the revised accounting standards, the fair value measurement of tangible asset is allowed. The current stock prices have already included the fair value information of tangible assets. Thus this results suggest that investors react negatively to early adoption of fair value measurement for the tangible asset. Fair value measurement can reduce usefulness of accounting information in the absence of the infrastructure to determine fair value. This result shows investors' such concern. Third, investor responses to announcement are negative for firms with higher foreign debt ratio. This results suggest that higher foreign debt ratio is still considered as a bad information to investors even though the revision of accounting standards could reduce foreign translation losses on financial statements.

Keywords

• global financial crisis
• revision of accounting standards
• event study methodology

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